Stage is set for RBI rate hikes

After a very strong first half of the year, India’s economy is set to cool but annual GDP growth should still average 7% from 2026-2028, an enviable rate by global standards. Rising food prices on account of a weak monsoon will push headline inflation to the upper bound of the RBI’s 2-6% target range over the coming months and we think the central bank will raise interest rates before long. We expect 75bps of hikes to the repo rate to 6.00% by the middle of 2027 – a more hawkish view than the consensus.